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tv   Fast Money Halftime Report  CNBC  December 31, 2013 12:00pm-1:01pm EST

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once in a tgi friday's. i'll leave it at that. >> jane, thank you so much. happy new year to you, as always. jane wells in los angeles. the return of casual dining. >> i love the price. you know, the rule on real estate, buy the cheapest house in the best neighborhood, applebee's, great deal. jane had it right. >> happy new year. >> you, too. great to visit with you. >> happy new year to you, as well. let's get back to headquarters and scott wapner and the "halftime." all right. the first half in the book and here are the highlights so far. >> -- going to say the pope shouldn't be talking about the disparity of wealth and the poor being left behind in our society? >> have you read -- >> the pope is not going to listen to what ken langone has to say. >> the problem with abercrombie, it used to resonate, and now it doesn't. they need to shake things up, change the board around. i can't believe they re-signed jeffries. >> i can report that dan loeb's third point has taken a position, a new position, in
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hertz, and that it is under 5%. let's get straight to the game plan for the second half, the predictor. jeremy segal nailed this market's move, so where does the prognosticating professor see plays for 2014? kate kelly reveals exactly how he did it. we start with the traders, best and worst of 2013, and here's today's starting lineup. stephen weiss, looking to stay long and strong in 2014. simon baker, he's had some cloud plays this year. jim leventhal, he likes the year's worst stock, and jon najarian is patting himself on the back for a social trade. dr. j, you're up first. >> it was back when facebook was trading around 24 bucks. believe it or not, back then, scott, somebody stepped in and bought an awful lot of the
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december 24 calls, big amounts, blocks of 5,000, 10,000. sure enough, facebook turned and burned to the upside. got as high as $58. turned to $2,700 investment, that's if you bought just 10 of the contracts in the options, scott, turned it into $34,000. as far as best, it doesn't get a lot better than 1,200%, scott. >> no doubt about that, doc. what about one you'd rather have back? is there one trade you regret making this year? >> there are so many. a recent one would be carmax, because going into earnings, scott, in december, we saw unusual call activities, stocks 51 bucks. i got greedy. it went to 53, then came out with earnings and it broke all the way down to 48. so virtually, the $1.15 for the options vaporized as the stock traded down just the week of expiration. >> steve weiss, your best call of 2013 was what? >> best call was the airlines, clearly. and guess what? it will be a great call next year, too. it's an interesting -- an
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industry going through a met morphous, and it will continue. after the merger action is complete with american and we've seen united what they've been able to do. the other really good one in an environment where it's incredibly difficult to short was jech jcp. -- jcpenney. that's down 50%, and against a market that's up 30%, that's an incredible performance. i still think that's a good short next year. right now, i'm out of it, though. >> jim leventhal, your best call? >> one we had a good number with was winnebago. a lot of people thought in this environment, nobody will be buying rvs, but these guys make money with 40% capacity utilization. they're profitable with 60% of the factories unused and now the capacity is ramping up and making more money. a great trade for one year, and for two years looking back, it's
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about doubled. >> lack of volatility caught you by surprise a man? >> oh, man, that murt. let's face it, being cautious this year it went against you. >> right. whether it's the gold, the vix in your case. >> yeah, a small hedge in the volatility, the vix, and it didn't even perform during the taper tantrum of may and june. so around june we got rid of it, but definitely dragged on performance. >> simon baker, a lot of talk about social media. where does that rank in terms of what the best trade was? >> i mean, pick your poison in that one, scott. yelp, linkedin, probably groupon, did $2.5 billion in revenue, no debt. i think it's barely scratching the surface in terms of ecommerce mobiles, and that's my favorite name going into 2014. >> let's take the good with the bad. weiss, if there's a trade you could have back? >> clearly alcoa. i didn't ride it all the way down, but a painful, rather sizable loss, especially in the context of an up market. and the miscalculation was in
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terms of their underlying assets. they weren't as high quality as i thought they would be. so i'm out of it. however, it was two to four-year play, and now closer to four years. and, hopefully, i'll get even when i go back into it. >> we talked about, you know, in our starting lineup, if you will, what your view on the market will be in 2014. you're staying lock. >> staying long and strong. nothing's changed. i take that back. you know what's changed? the economy globally is improving ex-china, which i think is still a house of cards. europe, we're seeing a better economy. actually seeing job creation there. france aside. but that was never what really drove the economy there. so you're getting rid of tapering, gives nobody an excuse to blame the fed for not coming in. you have to be in. and when you take that in conjunction with what i think is a bear market in bonds, equities are the only place to be, and the u.s. is the best place to be. >> talk to me, jim, about the worst dow stock that is now one of your best ideas for 2014? >> well, let's use ibm as a sort of diagnostic for what we think
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we should do going into 2014, which is rotate out of the winners and into the losers. i pretty much agree with steve that there isn't too much to fear in 2014. but 5%, 7% correction, just to break the trend line, is not inconceivable. and if that happens, we'd rather be in the cheaper names than in the higher-beta expensive names which could get hurt a lot more. ibm is so cheap. steve and i debated it last week. it's so cheap, it's not going anywhere. it's a nice, safe place to be if we do get a little minicorrection. >> a year ago, with the dow sitting at 13,000, professor jeremy segal made a bullish prediction about stocks and held that view all year long. >> we had 16% return last year, a very good year. i think we're going to match that and do better this year. so that does mean an all-time high for the s&p. i certainly wouldn't throw in the towel. and i'm still, you know, proj t projectiprojec
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projectiprojec projecting dow, 16,000, 17,000. my data shows the fair market value based on current earnings for the dow is probably around 18,000. i don't think this bull market is over yet. i still think there's good gains to come. >> well, professor siegle from the university of pennsylvania's wharton school is here with the outlook for 2014. professor, thank you. >> thank you. thank you for having me. happy new year. >> yeah, happy new year to you, too. thanks so much. great to have you back. you had a great year. you nailed it. a fair value, you say, is 18,000. look, a lot of people, i think, laugh when you throw out numbers like 20,000, that you have said in the past, you think the dow can get to. you still confident that we're on the road to 20k? >> well, fair market value is 18. well, one thing we know is that bull markets usually don't stop at fair market value, they often overshoot it. now, how much is certainly a matter of question. just like bear markets overshoot on the downside. so, you know, 18,000 seems to be
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a real fair market value given what i see as earnings coming p up. but, you know, bull markets usually carry 10%, 20% beyond that. i'm not going to say that that's going to happen this year. i'm just saying it certainly could happen. >> multiple expansion is what the bull case is really predicated on, right? >> yes, yes. >> what gets us there? it's top line improving, bottom line getting better, interest rates low, that certainly factors in, as well. >> yeah, a lot of people say, you know, 15, 15.5 is the average price earnings ratio for the dow. for the dow or the s&p. but that's true. but that's under all interest rate regimes. when you get to interest rates of 8%, 9%, 10% or higher, which we had, that sends the market way, way down. so what i did was take out all those very high interest rate regimes and if the interest rate's less than 8%, and no one thinks it will get anywhere near that high, we've had a 19 -- 18
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to 19 price earnings ratio, that's what i base my fair market value for the s&p and the dow on. we are going to have higher interest rates, no question about that. but they still are very low on historical basis. >> professor, first of all, congratulations on a great call and full disclosure. i disagreed with you early in the year, but came into your camp, and it was rewarding. in terms of next year, you had mentioned multiple expansion. but isn't there a possibility that you're being conservative on your earnings outlook? i mean, you've got just a very, very healthy corporate outlook in terms of how their balance sheets are, and while their margins are very high if you get some growth in the economy, you could see the margins go a lot higher, and wouldn't that then drive the p/e higher in the market? >> i guess, in other words, professor, you're not bullish enough. >> exactly right. [ laughter ] >> i very rarely have been accused -- >> i was going to say, when was the last time you were accused
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of that? >> working into it slowly. >> i don't remember. let me say the following, and you're right, this is based on a 5% earnings growth, and that very well could be quite conservative. i think we'll get gdp growth north of 3%, even 4% is possible. and when you include the buybacks, the leverage, et cetera, we could have another 8% to 10% earnings, and that actually -- certainly, that would drive the fair market value from 18,000 to 19,000, maybe even a little bit higher. but again, that does suppose that we're going to have that stronger growth in 2014. nothing is a slam dunk, as we know, but certainly that's looking far more favorable now than it did six months ago. >> professor, people here, you make these kinds of predictions and it causes them, at least, some concern in that when they look at what the market could do next year, they say, the only thing i'm worried about, nobody seems worried about anything.
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you can't really put your finger on something of worry. >> exactly. absolutely. and, you know, we always say the market climbs the wall of worry. and it is true. when the market -- when there are no worries, no concerns, the sky looks blue, that is usually the peak of the market. now, why i don't think it's the peak now is even though those major worries have subsided, we still don't have the public fully in the market. we've talked so many times about how really little has come out of the bond funds into the stock funds. at market peaks, you get much more public participation than you do now. so certainly those clouds are parting, but the momentum from bonds, alternatively -- look what happened to gold. where are people going to go? i mean, they're still going to go to stocks. >> mm-hmm. >> and that, i think, will drive the bull market further. >> professor, you be well. happy, healthy one, and we'll look forward to many more
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conversations in 2014. >> thank you very much for having me. and happy new year. >> all right, thanks so much. professor jeremy siegle at the wharton school. three trades on the best and worst performing stocks of 2013. first up? well, netflix, the s&p's best performer this year, up nearly 300%. doc? >> scott, i'm still waiting to see, you know, some big-volume days as far as any sign that mr. icahn might be getting out. if he's not getting out, there's still enough people being squeezed, judge, that this one could see 400. you know my feeling on it. i think it's frothy at this level. but doesn't mean it can't go higher. >> to the best of the dow, and that is boeing, after finishing 2012 flat, it's up 80% this year. mr. baker? >> yeah, you know, and i think it will go higher. the commercial arrerospaceaeros new 787 boeing, it's an awesome, awesome plane. they just announced $10 million repurchase program, 2.2%
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dividend, and the stock will go higher in 2014. >> i don't know if there's another stock out there that was as resilient as boeing, just in the face of all of the stuff that happened this year with the 787. >> it's a duopoly. so you have the airline sectors moving well, and you have them. and what else, airbus? that's it. those are the two players, so with the growth in the economy, it's natural -- >> there were so many reasons for this -- >> and defense. 40% of the business is defense. >> so you had the sequester and the 787 problems. >> that's a credit to management. the ceo is just phenomenal. he came in, he redid the company essentially and their whole supply agreements left over from the prior ceo, and it's just taken off. >> one thing on this, you have to realize the problems get more press than they're worth. these guys know how to build planes and fix them. you should take it with a grain of salt when a battery goes up in flames. >> from first to worst, and that's belonging to newmont mining. after falling 27% in 2012, the downward momentum continued.
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newmont has fallen another 50%, the worst in the s&p. weiss? >> yeah, i expect at some point the stock will be a trade, as will gold. but gold is unanalyzable, and when you get close to the costs of taking the or out of the ground, versus what you can charge for it, you are sort of upside down. and that's what's happening and that's what's happened with the gold miners. the yield doesn't matter here. that does little to stem your losses. i'd stay away from the whole sector. coming up, a wild ride for twitter and the ups and downs made a bull and bear out of two traders here who will debate the stock's fate. then, listen to john paulson back in july at our own delivering alpha conference. >> i'm not sure if house prices will increase 10% every year, but it's likely over the next five years, they'll increase 5%, 7%. so there's still a lot of upside. not too late to get involved. >> that turned out to be a quite profitable thesis in 2013. in fact, paulson's recovery fund
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doubled the s&p's returns this year. we'll break down his and other hedge fund winners just after the break. more "half" straight ahead. we're aig. and we're here. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space. we repaid every dollar america lent us. and gave america back a profit. we're here to keep our promises. to help you realize a better tomorrow. from the families of aig, happy holidays.
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welcome back. with the s&p up nearly 30%, a few hedge funds managed to outperform the market. kate kelly, happy new year, first and foremost. >> scott, same to you.
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thank you so much. >> it's been great having you on the show this year. we look forward certainly to more of that. >> me, too. >> what do you have on this one? >> you would think beating or matching the bull market would have been easier. the average ledge fund, in fact, was up 8% through november. so those that delivered 30% or more really do stand out this year. take a look. leading the results in our unofficial poll, so this is highly anecdotal but certainly accurate, glennview, and john paulson's recovery fund, another big winner i'll come back to, up about 60%. glenview's bigger fund, less aggressive positioning, up about 43%, and dan loeb's third point up about 40% through late december. there were plenty of interesting strategies here and i'll run through some later in the day. to focus in on paulson, because the comeback is worth noting after everything the fund company has been through. the performance is due partly to
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mortgage-related stocks like radiant and genworth, up by triple digits this year. and made money in the ipo of extended stay hotels, which happened in november, as well as financial names, including blackstone and apollo. it's remarkable, scott, that paulson has made big money on both turns of the housing and economic cycle. the downside, of course, and now the upside. >> yeah, kate, people are ready to write this guy off because of the gold thing, right? he had this great housing trade, and then the gold thing didn't work out as he had planned and people are writing the guy off. >> well, it's interesting what happened with gold, scott. i think the reason paulson got so much attention for it, and i was one of the payers of attention, so i have to cop to that, is because it was -- it was considered to be the next big macro thesis, right? after the housing short that did so phenomenally well in 2007 and 2008, the next idea was gold would benefit as new money was pumped into the system and inflation occurred. to be fair to him, when he got into the trade, gold was $900. so he still is in the black
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overall on that, although certainly we've come off the highs we saw in 2011. he is still a big believer. he has a small but loyal band of investors that are still in the gold fund, but it's taken a massive beating year over year, so they're de-emphasizing it, and they're, of course, emphasizing recovery and other strategies, including the m&a funds, which have done well. >> kate, you have insights into this industry. stay with us, if you would. i want to bring in anthony scaramouche, you know him. he's heavily invested in john paulson's fund. anthony, you there? >> i'm here. happy new year. >> same to you. i know you're on a mobile phone, so if something breaks up, we'll have to run, we'll keep it brief, anthony. >> yes. >> i understand it's a top holding for you, right? >> it's our number-one holding. i think bloomberg reported we had 490 million, but that's upwards to 600 million now.
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it's been our best performer, and what kate is saying and what jon said at delivering alpha, it's a inflation trade. he's betting on the economic growth and the opportunity there. he's also bought some really nice assets like the st. regis in puerto rico, so this is our number-one holding across the fund family, if you will. and we're big believers in shareholder activism of the future. '13 was the year of the activist, but we believe '14, scott, will also be a very good year, because of all of the cash on the sidelines coming in to these special opportunities. >> how about -- i'd like to get kate kelly to weigh in on that, that thought there, anthony. kate? >> well, i am hearing a lot of that, scott. i do think people are bullish equities in general, although they might be a tick less constructive than in 2013, which makes sense, given valuations are much higher. i hear a lot of talk, as anthony
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saying, inventor of stories, and hearing the term constructivism, which may have been coined on our air by larry robins of glenview, the 97% upside. so more suggestive approaches for management, looking for board changes, changes in capital structures, and i'm also hearing that we should look out for companies finally making use -- and, anthony, i think you agree -- of the cash on the balance sheet. they've run inefficient capital structures and it's understandable given the concern of the economy, but at the same time, they need to put the money to work. we may see more m&a, a continuation of buybacks and other things companies want to do to deploy the dry powder. >> to kate's point, scott, the catalyst there is a growi growing-faster-than-expected economy. it will likely grow at 3.5%, possibly 4% clip. this will give ceos around the united states the opportunity to use that cash strategically, and this is the reason why -- i'm
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not saying we're overly bullish on the market it's a 5% to 15% move on the market. but the activists can do much better in this cash-rich environment. >> yeah. >> so you see what skybridge did, as we shifted from credit and structured credit into this what we call the equity activist or the equity directional, you know, nondirectional moves if you will. this -- this stuff where we see a catalyst. >> and i hung up, scott and anthony, with a hedge fund manager who did well this year, and said he has no love for credit at this point, or especially fixed income. i said, what do you mean specifically? he said, i don't think the returns in most corporate bonds are going to get you very far. there's a lot of risk when you look at sovereign bonds. you really need to be deeply involved in situations and do the research, you know, the "wall street journal" today talked about investors who did well in emerging market bond funds and places like benos aires, and a lot of political and structural risk in the places you have to be familiar with. he was really saying people are going to need to pick their
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spots in the bond market in the new year if they're going there at all. >> we have to run. kate, thank you so much. antho anthony, thanks, as well. we look forward to 2014 with both of you guys. up next, the twitter roller coaster ride after major gains last week, followed by big drops on friday and yesterday. it's back up today. what gives? a street fight is ahead, and you'll decide the winner. plus, gold is logging a tough year, one of the worst in a long time. will 2014 hold more pain for the precious metal? we'll go to the futures pit for answers. much more "the half" is up after the break. it's as simple as this. at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has.
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the u.s. ♪ most of america's energy comes from right here at home. take the energy quiz. energy lives here. all right. welcome back to the "halftime" show. what a week it's been for twitter? recording monster moves in both directions. what should you do now with the drastic moves? let's debate it. dr. j is the bull, steve weiss is the bear. 1:30 on the clock. doc, make your case, a case heck of a lot easier to make a week ago. >> no, it was easier today, judge, because last thursday, i believe, is when the stock peaked out. it hit 73 bucks a share.
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turned and burned to the downside. we said, hey, let's take it off. yesterday, judge, i got back in, got out of all of the shorts, got in. here's why, stephen. number one, the site for young people. number two, snapchat, the fact that so many young people are afraid of the vulnerabilities that have been exposed that potentially could reveal who they are as well as their snapchats, that's bad. jack dorsey's now on the board of disney, the co-founder of twitter. that's going to be huge, i'm salivating as a shareholder about what that can mean for the company. >> what could it mean, doc? what could they do? >> well, you can only imagine, stephen -- >> i'm trying to, help me out. >> -- abc, espn, all of the movies and so forth. every other studio will be chasing -- >> 140 characters, i'm going to watch a movie? >> no, you're not going to watch a movie, but it will link you to a discount to that movie, stephen. lastly, take a look at the massive short interest. that's another reason to own the stock. that's another reason -- >> doc, doc, look, here's the
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story, transformative from the social standpoint. >> yes, sir. >> where else could justin bieber get 91 million followers and be the king of a company? here's my issue. the valuation is excessive. the volatility is incredible. it's an ad model at the end of the day, and i never clicked on the ad. the ad's too easy to avoid. so it's great for people who have consumer business wanting to reach a lot of people, but when it comes time to measuring the return, and once you get past the low-hanging fruit of that ad spending for companies, you're going to be left with still an overvalued company. >> i think we may have a split on the desk. i don't know, among the jury. but, jim, you're -- you're certainly not a twitter bull, are you? [ laughter ] >> how did you pick that up? no, scott. look, i'm a value guy. steve has a point. it trades 62 times sales for this year. sure, maybe it's going to grow, double, quadruple, and for dr. j, let me say, i think it's a fabulous company. i love the company. i don't like the stock at this valuation.
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it's just valuation. >> i'm not shorting the stock either. i mean, you can't short -- >> well, that's dangerous. >> we talked about that last week. there's a big difference about whether you buy a name or whether you'd short it based on the valuation. >> but doc, the fertile imagination, i think -- [ laughter ] >> it's a $48 billion company. it doesn't generate earnings. it loses money. >> we'll see. look, the first earnings report as a publicly traded company is going to be the most watched of -- god, almost any company in the long run. >> yeah, since facebook, right? >> yeah, and contrast this versus the morgan stanley-led facebook, so i'm sure the banks are giving them the guidance, the vcs have given them guidance. set a number out there you can beat. and that's the key. keep the earnings in the stock. >> tell us who you think won. tell us about twitter. tweet us @cnbcfastmoney, use #bull or #bear.
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a volatile day for gold. the precious metal trading in a $30 range. let's find out more from jackie deangelis. hey, jackie. >> hey, scott. after approaching three-year lows, we saw gold bounce up more than 3% in just one hour. a lot of volatility here today. anthony, you're with me at the nymx. traders are telling me this is really a technical bounce here. do you agree? >> that's exactly it, jackie. back on june 13th, we had a light of 1,179.40, and got there just about there this morning, bounced off it. i think gold has another leg down, and i'm still looking to short it. >> brian stutland, i'm going to ignore the fact that you're in florida and ask you my question about gold. we haven't seen it have as bad of a year as it has had this year since 1981. what's in store for gold in 2014? >> if you look at the technicals in gold, it's lining up not to be that great in terms of reaching a lower price target. i'm a math and science geek, right, so you look at action and reaction. okay? and basically, the action of gold having a range of about
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$400 back in 2011, until it finally cracked that 1,525 mark, so as soon as we cracked that, that $400 range may now move down to the lower $400 range. so meeting the goal, it's really less than $1,175. we need to get to the lower point to complete the sort of action/reaction move in gold, and that's probably where it takes it in 2014. do you hold gold somewhere in your portfolio? yes. but take your allocation down, because the stocks are favor, not gold. >> i don't know of the situation. jackie is having an audio problem. i don't know of a great scenario that exists in 2014 where people would say gold has to go higher. and that's one of the problems. >> the only thing i see, scott, inflation. that's the only thing i see. if inflation rearing its head, you'll see the gold bug start looking at gold. but other than that, i agree with you, i don't see a lot of catalyst to take it higher. >> guys, be well. we'll see you soon. >> thank you. happy new year. >> thanks so much. will 2013 be known as the year of the activist investor?
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it certainly seems that way and you might think so after seeing how my next guest's fund racked up a 36% gain. and don't pop the bubbly yet. some stocks have a hangover, closing out the year with a major headache of bear territory wo woes. that and much more ahead. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪
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i'm courtney reagan at the breaks news desk. more trouble for target. target is confirming that a small percentage, .01%, of gift cards sold over the holiday period without specific dates were not fully activated. target says that the guest disbring the cards to the guest services, and they'll be able to use them, though it may not work right away at the cash register. so more trouble for target. some of the target gift cards were not fully activated during the holiday period. scott? >> oy.
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as if they needed any more trouble. >> i know. >> court, thanks. dr. j, i understand, there are people who are on the desk who are active in this game. -- name. you are very active. i understand you bought it 10 minutes ago? >> yeah, one of the reasons, judge, they're coming in and buying upside calls. you know what they say. any p.r. -- any news is good, as far as increasing awareness of the brand. it traded down to 61 on bad news the same way boeing did, judge. and yet, it just surges right back up to higher than where it was when the credit card breach was released, higher than where courtney just described the cards not being properly charged, so they don't work at the registers. it seems immune right now to any of the bad news that's hitting it. so i would ride with the rest of the guys. they bought the january 60s, judge. >> you're saying that options traders were heavily trying to take advantage of this most recent pullback in the name? >> yeah, exactly right, judge. and they've been buying for the last couple of days.
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this morn, they bought within the first hour several thousands in large blocks of out of the money calls as well as in the money calls. >> the stock is moving. steve weiss, you also own it. >> i on it. i bought it for the credit card fiasco happened, and bought more on the dips. i've owned the stock for about a month or so. look, here's the story. it's the cheapest retailer out there to growth. it's much cheaper than costco. it's much cheaper than any other stock like that. i think it's going to be a great story in 2014, because the big issue is really canada, and that's getting behind them quickly. >> all right. well, our resident stock swami was buying hertz based on unusual volume he saw at the beginning of the month. hertz is soaring to a record high on my report earlier that dan loeb's third point has taken a position. doc, are you still in the trade? >> well, i'm still in most of it, scott, as far as hertz, htz, but i took off about 75%. it was a heck of a pop. early december, we were on your show -- well, not even early december, i'm sorry, just
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recently, just talked about the unusual activity. the stock made a nice pop. it's a quadruple already from the entry to where it is. and now i see jpmorgan also moving -- i believe it was morgan, an hour ago -- moving the target up to 35 from 26. so it's going hertz' way right now, judge. >> yeah, a couple of components back on this desk, loeb had taken a position, under 5%, from what i understand from my sources, and that keith meister's corvex had had a meeting with management some three to four weeks ago that was described by my sources as being constructive. so you do have some activist stuff at work here. the whole thing sort of started rumb rumbling, if you will, late in the day, when hertz came out and said they had adopted a poison pill. >> yeah, and you did a great job, i was watching this morning as i was trading, great job. they're in a great space. you've had the consolidating business, so the fundamentals are very strong.
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airplane traffic's very strong. travel's very strong. and by the way, can you do a lot worse than following dan loeb or mieflter in it. if you follow dan loeb's portfolio, you'd be a wealthy guy. >> and it segues so perfectly into the next segment, because the guest next to me runs the 13-d activist fund, a fund that returned 36% this year by focusing on big activist holdings. ken square is the founder of 13-d activist fund. great to have you here. >> thank you. >> the question of whether following the big guys into a name based on a filing, whether it works or not, your performance would suggest overwhelmingly in many cases it does. >> absolutely. and before i started the fund, i've had research for six years, before that, and we did a study on the big 13ds, and what we found is there's an average one-day bump of 2.65% that you'll never capture, but the average holding period is 15 months and during that 15-month period, there's a 16% outperformance.
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over the s&p 500, and that's what we try to capture. >> it is one of the sort of central questions that's asked almost daily on this network, any time we report a new holding or new filing by a big name, a so-called whale or a well-known activist, whether you should follow them into the trade, obviously it doesn't work in every case, but simply looking at the filings, you've been able to discern what investments seem to be good ones or not. the valiant pharmaceuticals, vrx the ticker for all of you plays a the home, 99% this year. >> yeah. that's been our best position. it was a good position for us last year, as well. a lot of times, the best activism is when a good activist gets on the board of a good company and just stays there and helps to continue to create value. and what we love about valiant, also, the activist catalyst is as strong today as it was six years ago when they first got the board seat. >> ken, it's jim lebenthal. do you think you have a time
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delay from when the activist takes the position until when the 13-d is released? there is a several-day delay there. do you miss some opportunity through that? and, also, on the way out, you know, somebody take as position, says, this is a blown trade, i'm getting out, you're going to be the last to know. >> well, yeah, ten calendar days after they get above 5% they have to file the 13-d. so they're going to have a generally better average cost than us. getting bigger fees than us. >> they do more work, too. >> exactly. on the way out, it's a one to two business days when they move by 1%. they have to file a 13-d amendment. they go from 15% to 14%, a lot of times we know they're on their way out, we can sell our entire position. >> but isn't the key here not really picking and choosing, not being too selective, you have to fire the shotgun and take as many shots as you can, meaning bias many of the filings as possible? >> there are tons of filings, right? how do you go back discerning which ones you should buy? >> we simply analyze the event.
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who's the activist, what's his track record, what sector is he investing in, what's the track record in that sector, what's the strategies, operational, corporate governance -- >> what percentage of filings do you buy, on average? >> steve, there's 2,000 13-d filings. when you buy it down, you know, there's hundreds of them. and we have about 38. >> one thing's clear is that, you know, this was the year of the activist. >> mm-hmm. >> and activists seem to be more emboldened than ever before, and companies don't seem to be as dismissive as perhaps they've been in the past. would you agree with that? >> absolutely. and you have -- and the reason is the third thing is institutional investors are embracing activists more than they ever have in the past. they used to not even talk to these guys. now they're calling them with investment ideas. and the lawyers and the bankers that represent companies are now
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telling them, you need to engage with the activist. you need to talk to them, you need to hear them out. you wouldn't have had that five, six years ago. >> ken, thank you for coming in. ken square, 13d activist fund. good to have you. happy new year. some companies certainly will be happy to close the books on 2013. when we come back, we'll have a special report on the worst performers of the year and what's next for them next year. we'll be right back. if yand you're talking toevere rheuyour rheumatologistike me, about trying or adding a biologic. this is humira, adalimumab. this is humira working to help relieve my pain. this is humira helping me through the twists and turns. this is humira helping to protect my joints from further damage. doctors have been prescribing humira for over ten years. humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms.
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coming up on "power lunch," europe, not a bad year there. where are the opportunities, though, in 2014? we're looking at stocks suffering a hangover from a rough 2013. will they snap out of it in the new year? and it may be time to freshen up the resumes. a high-tech hiring boom brewing in silicon valley. we'll see you at the top of the hour. >> all right, thank you very much. some companies will be saying good riddance to 2013. excuse me! can you say good riddance? i couldn't say it. sheila has the stocks that didn't fare as well this year. hey, sheila. >> hey there, scott. the champagne hasn't been stocked yet, like gold stocks, after gold took a drubbing. ubs says the outlook for gold is not much better which could mean
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more hangover pain. and blackberry singing the blackberry blues, down about 40%, there is a but. the stock has rebounded 16% in the last month alone in the hopes that john chin can turn around the company. and rackspace, a company that's in a really hot space. cloud computing. two big ifs now are impacting the stock, and that's amazon and google. both of the companies entering the space, so a lot of people concerned about the competition, and also what that could mean for pricing. finally, we've got to talk about retail, because jcpenney, lululemon made some of the big headline stories this year on the big misses, but don't forget about the teen sector. that's been way out of fashion this year. aber kr abercrombie, american eagle, one analyst said it's been beaten down so badly, if the companies can show a hint of improvement in the new year, 2014 could be a big year for the stocks. scott? >> all right, sheila, thank you so much. coming up, from worst to
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first. we're unveiling the biggest reversals of fortune over this past year. that's next on "the half. "request bny mellon combines investment management & investment servicing, giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds.
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incredible but it's still cheap. about $40 million of cash on the balance sheet, trades 13.5 times next year's earnings and employment is picking up, payrolls are picking up, best buy looks good for 2014. >> you think that's the case, bakes? >> we own that stock, yes? >> on that one. >> yeah. >> with us? >> i am with you. >> you're awake. >> i'm awake. >> i'll be a little more expansive and help him outp. the low hanging fruit has been picked, still a competitive, very price centered business. there's no reason for the stock to go down until they miss and that comes home to roost. it's cyclical. i think the best days are behind it. >> weiss, somebody give baker a red bull or something. pitney bowes fell 42% in 2012, this year the stock up 119%. where does it go? >> i will never be at a loss for words. pitney bowes, an amazing turnaround story. who would have thought anything associated with snail mail would
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turn around but they've changed the business, become more just broadly business oriented and it's done very well. it's not expensive but i'm not playing in this one. other areas i would rather go than associate with corporate spending. >> simon, i'm with you scotty. >> talk about hewlett-packard, down 44%, 2013 up near 100%. >> you love it or hate it. a complete turnaround story and it's turned around this year. we were long in the stock early on. pcs are stabilizing in here. it's a company that looks strong and talk about coming out with a 3d printer next year. weiss, you like this? >> i think it's okay here. i do, i think eds is the story in the consulting business, has terrible margins and competitive space will do well for the reasons ibm won't. >> don't get too comfortable, steve. our traders are quick but not always right. in september steve made a bearish call on ak steel. let's listen to that. >> here's the story. there's too much capacity, it's going to be cut back, and china is not improving in terms of the
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industrial side, the infrastructure side. i would sell these stocks, take your profits if you traded it. if you have a loss take the loss now. >> all right. since you made the call the stock has spiked. it's up 100%. that's all. >> yeah. well look, i'm not always right. this happens to be one of the times i was dead right. i shorted the stock and made money. i haven't talked about it for a long time. >> you haven't. >> since the beginning of the year. >> i need to call steve grasso up on this one. >> he's got a second job to pay for his losses for opening this. in terms of china that's still bad and still not getting better. so right, right, grasso wrong, go to another one. you must have one. >> doc, you tell me, tell me about this trade, ak steel. what's the best play here? >> well, that is one of the best in the space, scott. stld would be my number two and u corps number three. not super hot on any of the steel stocks right now as grasso would have told weiss december is the time to buy them.
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buy them from thanksgiving and you sell them right now, judge. >> we'll take a quick break and come back and do final trades and find out who you think won our debate earlier on twitter as well. we're back after this. year ♪ [ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection. at the lexus december to remember sales event. but with less energy, moodiness, and a low sex drive, i had to do something. i saw my doctor. a blood test showed it was low testosterone, not age. we talked about axiron the only underarm low t treatment that can restore t levels to normal in about two weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant, and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications.
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and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection. welcome back to the halftime report. check out shares of luxury retailer coach, drifting now down towards session lows, down about a percent. remember this is the last day of current ceo lou frankfurther's as the chief executive. next year starting tomorrow, it's going to be victor luis. the company's international head is going to take over as ceo. remember this is a stock that hasn't been a favorite in investors. it's only up about 0.6 % year to date not of a lot of this optimism compared to its peers. >> the dominator, thanks so much. you have optimism on this name, don't you? i thought you were negative kors and positive coach. >> negative kors and coach. michael kors has been eaten all lunch but coach i'm more negative on.
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>> i own kors a little bit. i think it's a great story, more doors opening. coach, sell it. it's out of fashion. it's not coming back any time soon. the space is much too competitive. >> all right. >> if there's one group that knows fashion it's this group right here. >> at least half of it. >> we've tallied the results and you said jon the bull won our debate. >> there you go. >> on twitter. doc, congratulations there. >> thank you, sir. >> at weiss' ex sneens all his twth followers. >> always tweeter when it's weiss. >> final trades on our final show for 2013. it's been a great year in the markets as all of you know. fun with you guys as well. simon baker. give us a final trade. >> groupon barely scratching the surfa surface. >> jim. >> i know it's big but apple, you have a balance sheet that's for tress like and a cheap valuation. it's big but you'll make money. >> a second half story. i have pete najarian ringing in my ears on that and came to
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fruition. >> steve weiss, i would be remiss if i didn't give the viewers a bonus. citi being one and tenet health cares or the hospitals in general, will get it right this year. >> doc. >> pick one out of favorite, abx, unusual call buying today. >> happy new year to you guys. see you on the other side. power starts now. >> and welcome to "power lunch." we are starting at the tradition at the cme and happy new year, rick santelli. are you there? >> chicago. >> happy new year from the cme in chicago. i don't even think the fed could have done a better job if they had dollars thrown up in the air. we all wish everybody out there in tv land a happy and prosperous and healthy 2014 from the cme group. happy new year. back to bertha. >> happy new year to you and the traders at the cme. back to business, 2013 was good, what about january? dominic chu on the stocks


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